Microsoft's New Plan To Raise Prices Is Scaring Some Enterprise Customers, Expert Says

Microsoft rolled out a new pricing scheme on an enterprise product called BizTalk that could cost some of its biggest customers a lot more money, licensing consultant Cynthia Farren told Business Insider.

Prices for server software depend on the size of the computer that will host the software. The bigger the computer, the higher the price tag. Microsoft used to calculate its fees based on how many CPU chips a server had. Some servers have 8, 16, 32 or more CPUs. These days, each of those CPUs have two or more “cores,” too.

Microsoft has decided to count “cores” not just “processors” when figuring out how much to charge. (In geek speak: Microsoft moved from a “per processor” model to a “per core” model for BizTalk Server.) BizTalk is enterprise “middleware” used to help applications talk to each other.

But what’s really worrying enterprise customers is that this is the second product to get the new pricing scheme. Microsoft did the same thing for its SQL Server database.

This could signal Microsoft’s intent to use the new licensing model across all of its enterprise products, including its very popular Windows Server.

This means Microsoft software would suddenly become a lot more expensive.

Farren says that, thanks to the new “per-core” pricing model, some BizTalk users could be facing price hikes of $1 million. Once installed, BizTalk and SQL Server are not easy products to rip and replace, so customers are likely to pay up instead of getting rid of it.

Farren sees the move as a way for Microsoft to “glue” more revenues “on the backs” of its existing enterprise customers, she says. “They are trying to cover losing business in other areas like the PC business,” she believes.

Here’s the tricky part. If a company has Microsoft’s extended warranty program, called Software Assurance (SA), Microsoft will often offer a price break the first time Microsoft presents the bill, as long as the company renews SA, Farren says. Most enterprises have SA.

But under the new scheme SA will cost more, too. So customers will be asked to pay more for both the software and the extended warranty. There are technology tricks companies can use to reduce the amount of software needed and counter the costs, but even so Microsoft’s fees “will still be more painful” than they were before, Farren says.

Microsoft isn’t the only company using per-core licensing for its database and middleware products. Oracle has been calculating licence fees this way for years.

But If Microsoft does try to make this change to all of its server products, including its popular Windows Server, it “could face a full-on customer revolt,” says Farren, sending them into the waiting arms of competitor Red Hat.

VMware faced a similar customer revolt in 2011 when it tried change its pricing scheme. The new plan became known on Twitter as #vTax. After a year of customer outrage, VMware revoked the new pricing method.

Microsoft told us that it is currently using the “per processor” model for Windows Server and had no comment when asked if that will change. Microsoft also had no comment when asked how costs will rise on existing customers of BizTalk and on Software Assurance agreements.